August 03, 2006

Hiring a PR agency and what should you pay them?

Stuart Bruce in turn has added his critique of Andy's views on the matter.

There are a number of issues raised in all of these posts and associated comments - and I disagree with some of the points made in all of them. Here's my summary:

Andy Lark: "I don't want $15,000 dollars worth of service. I don't even know what that is! I want results. I don't care what it costs or whether an agency has to
under or over service to deliver it. I just want results against the
agreed budget. You commit, I commit, we all commit together."

I think Andy is being disingenous here - he knows what service is - its just that there is a big difference between service and value delivered. Any agency can show you they delivered $15,000 worth of "service" (here's the timesheets and the list of deliverables). However, can an agency show they have delivered $15,000 worth of value to the client business? And of course, every client wants more (much more) than a simple cost to value eqiuvalence. Part of the problem is that most clients have an expectation that the value delivered will be far in excess of the cost of service. But what constitutes an acceptable ratio of cost to value - 10 to 1, 100 to 1? There are no accepted benchmarks of what is a good return on service (ROS). So clients have a vague, unmeasurable notion that PR should be able to deliver value far in excess of the service required to deliver - so we end up with the usual attempts at trying to demonstrate that value - which many clients either don't understand or choose not to. As an aside, I've always found it curious that most marketing directors accept that out of all the elements of the marketing mix, PR is the one that potentially can deliver the greatest value to the business - and yet they resolutely refuse to invest more in it compared to advertising et al. Then again, perhaps the inability to demonstrate value lies at the heart of this.

Andy Lark again: "Finding a great agency is bloody hard work. They are few and far
between. At any billing rate. Few CMOs I know get the value of PR or
AR, let alone the value of a good agency... I accept we are part of the
problem, but...
finding an agency that gets your business and has a real
enthusiasm for contributing to the growth of the business - harder
still".

My issue here is with concept of "great agency". What constitutes "great"? They have a number of big name clients and a big client list? Just because an agency represents a Microsoft or a Dell, does that mean they are "great" for the prospect sitting in front of you? Companies that hire an agency based on hoping they'll do for them what they do for their big name clients are probably in for a disappointment. Indeed, if the subject is a start up, then the job they need doing is very different to that for a well established brand. I'd hazard what prospects are really looking for are the "right" or "appropriate" agency for them ie the teams that has the right combination of brains, grey hair, personal chemistry and executional ability to deliver what they need. Of course, how prospects goes about trying to find the "right" agency is no easy task - but might be made easier if they used a different selection criteria.

On the subject of "getting" a client's business, it must be said that some client's don't even "get" their own business - which makes the job even harder of persuading them of the right course of action.

Andy again: "Finding an agency that understands that great ideas get funded -
near impossible. They are caught in the conundrum or belief that ideas
require budget prior to being generated. Bullshit. (and I am talking
about real ideas, not those regurgitated from the last pitch)."

This is the old "opening the kimono" problem - what level of opportunity cost is the agency prepared to stomach in order to win the business. And with start ups, the level of risk involved for the agency is always greater (witness the agencies that got stung in the dot com boom by businesses that tanked owing thousands in unpaid PR bills). I'm sure most agencies would have no problem with coming up with fantastic ideas for prospects if they felt there was a reasonable expectation that they would get paid for their effort (eventually) or at least some kind of commitment that they'd get more business in return for overservicing in the early days. (How many prospects offer the agency the lure of more work down the line in return for "more for less" in the early days - but when pressed to put that into some kind of binding contractual agreement, run a mile?)

Andy: "What is needed is a new kind of agency. One not built on billable hours
and 10k budgets. Maybe one built on the power of ideas to drive a
startup's growth curve? One with the courage and conviction to
articulate a value proposition that resonates with the CMO of a
start-up and ability to explain what the budget should be."

I agree that the billable hours model for many clients is definitely past its sell by date - but until the value question is solved (see above), the demand for "a new kind of agency" as described by Andy sounds like code for "I want an agency that will do more for me, but I have to pay them less."

And finally, Stuart Bruce: "During the dot-com boom I achieved massive international media
coverage for a client because I had a great idea. The whole project
took just one and a half days and cost the client less than £1,000. The
objective was to attract the attention of about a dozen specific
organisations in order to secure meetings with their senior people.
Direct approaches had previously failed. The result was that eight of
the 12 actually approached the client and meetings were eventually
secured with all 12. Should I have charged them more just because it
achieved fantastic results? Of course not, that would have been
dishonest."

I don't see why Stuart couldn't have gone back to the client and pointed out the far greater than anticipated ROI - and ask for more money. Whether he got it or not is another matter - but I don't see that as a dishonest action. Again, if PR agencies got better at defining what constitutes sucessful outcomes and the value they deliver, perhaps there might be a tighter correlation between the work they do and the reward they receive. And no, I don't have all the answers to any of this - but good to see that people are at least trying to grapple with these meaty problems and do something about it.

Comments

I'm not being disengenous. What is great service? Do we pay for service? Great service is manifested in great outcomes and results. I may be being flippant though :-) ... It was late at night...

I agree that so long as agencies get stuck in the current paradigm of fee-based idea generation they are screwed. Isn't the definition of insanity continuing to do the same thing but expecting a different outcome?